Fair Work an albatross around the neck of business, says IPA

The Australian, June 26, 2017

The industrial umpire is overwhelmed by unfair dismissal claims, as a conservative think tank claims the Fair Work Act has become an “albatross around the neck” of small-business owners, with about 80 per cent of cases involving “go-away money”.

An analysis by the Institute of Public Affairs finds that unfair dismissal applications to the Fair Work Commission have tripled in the last decade, from fewer than 6000 in 2005-06 to more than 18,000 in 2015-16.

The report, by IPA research fellow Gideon Rozner, cites FWC data showing more than 80 per cent of applications resolved during conciliation involved cash and a third of last year’s payouts ­exceeded $15,000.

Mr Rozner argues that “claims with little merit are common” because they have “no consequences to the employee but significant legal costs for ­business”.

He uses FWC figures to illustrate the “time-consuming process” of dealing with unfair dismissal claims, with six weeks the median time from lodgement to determination.

Data from employer groups also shows bosses are required to spend an average of 11 hours per claim assisting members in unfair dismissal claims at the conciliation stage. For matters that reach arbitration, that increases to 52 hours.

“The regulatory nightmare ­created by Fair Work has become an albatross around the neck of Australian businesses, locking thousands of Australians out of the workforce,” Mr Rozner told The Australian.

“For the sake of the more than 700,000 Australians currently looking for work, the Australian government must remove the regulatory and economic barriers that stop businesses hiring.”

Before the Fair Work regime, businesses with 100 employees or fewer were exempted from unfair dismissal laws by the Howard government’s Work Choices experiment and, where they did apply, employees could make a claim only after at least six months’ ­employment.

The Fair Work Act changed that by extending unfair dismissal laws to all businesses, although it lengthened the qualifying work period from six to 12 months for small-time operators with 15 or fewer employees.

This led to what Mr Rozner called a “dramatic rise” in the unfair dismissal caseload, with the numbers rising from 5758 in 2005-06 to 18,045 in 2015-16.

Mr Rozner’s report also argues that unfair dismissal cases are subject to “unpredictable and perverse outcomes”. He cites contradictory determinations in a two-year period where the FWC issued directions finding dismissal by text was both fair and unfair, and that dismissal for “social media-related” reasons also was fair and unfair.

The IPA findings echo warnings by former FWC deputy president Brendan McCarthy, who told The Australian in January the work of the industrial umpire was ­increasingly taken up with unfair dismissal and bargaining cases.

He pushed for the FWC to be carved up and responsibility for the setting of the minimum wage and award standards, including penalty rates, to be vested in a new, independent body overseen by parliament.

In his report, to be released by the IPA today, Mr Rozner finds only 8 per cent of award workers are on the minimum wage, with the rest being kept on a series of what he labels “shadow minimum wages” built into the 122 awards under the ALP’s re-regulation of the labour market.

“Unions are driving pay and conditions of awards up via the modernisation and review process,” Mr Rozner says in the report.

“Of the 2.3 million Australians on awards, 92 per cent receive pay in excess of the statutory minimum.”